M&As of 2019 and our 2020’s Exciting Forecast

Written by Yair Geva and Ayalah Teitelbaum.

As the year 2020 comes charging in full force, bursting with new deals and exciting M&A prospects, a look back at some of the highlights of 2019 can provide a full view of the direction the world of exits is taking, and what we anticipate in the forthcoming year.

In the past year we’ve seen some tremendous growth in M&A transactions, both globally and here in Israel. The total value of M&As in 2019 was $3.9 trillion, with the tech industry being one of the fastest growing fields involved, and accounting for 20% of the transaction volume in the United States. Salesforce purchasing Tableu Software for $15.7 billion, Broadcom’s purchase of Symantec Enterprise Security for $10 billion, and Google’s acquisition of Fitbit for $2.1 billion, are just some of the remarkable examples of how the technology sector continues to make waves in the world of M&As.

Some large scale M&A transactions have been met with lawsuits. Such is the case with Boston Scientific’s effort to terminate its $275 million acquisition of Channel Medsystems, based on a supposed adverse effect resulting from fraudulent conduct by one of their employees. However, the attempt was met with an order from the Delaware Court of Chancery that the merger be finalized.

In Israel, some of the largest deals, such as PepsiCo acquiring SodaStream for $3.2 billion, have made it a record year in terms of both number of exits, and total volume. More than 50 exits over $20 million, and more than 25 exits over $100 million, combined with multiple buyouts and IPOs, have totaled in $21.7 billion in 2019 alone. In 2019, there were five acquisitions of over $1 billion, including Nvidia’s acquisition of Mellanox for $6.9 billion, and Habana Labs’ acquisition by Intel Corp for $2 billion.

Israel is a home to unlimited innovation, with over 30 unicorn companies. 12 of these surpassed the $1 billion mark in the last year, making 2019 another landmark year for private innovation. In 2020 we expect to see more growth of this nature, as well as a rise in both the number of M&A deals and the overall scale of them.

Surrounding some of these M&As is the occasional deal litigation. In August 2019 an Israeli court ruled in favor of Cyvera Co-Founder, awarding him millions of dollars, after waving most of his rights in the company preceding its sale to Palo Alto Networks for $200 million. The court ruled that the co-founder had been manipulated into signing unreasonably poor terms under waiver.

A recent case in Israel involving the taxation of M&A transactions has shed some light on how some of these M&As are likely to be handled in the near future. After purchasing a local company, Broadcom had contracted licensing agreements to use the IP rights from the Israeli company in its US entity. Despite the Israeli Tax Authority’s attempt to classify the value of such IP agreements as that of the entire acquisition, the court ruled in Broadcom’s favor. This may lead to acquirers considering more carefully tax issues when purchasing shares in the overall transaction.

Following the trend of massive M&A deals in Israel in 2019, 2020 opened with a bang, as evident by some of the large M&A deals already popping up everywhere. Insight Partner’s acquisition of Armis for $1.1 billion and ServiceNow’s recent purchase of Loom Systems demonstrate the forecast of what’s to come in the near future. 2020 is expected to be huge year in terms of M&As, with a projection of more large scale M&As expected.